Redundancies made since the start of the recession have resulted in a cost of £28.6 billion to employers, according to the Chartered Institute of Personnel and Development (CIPD).
In its latest Work Audit report, “Counting the cost of the jobs recession”, the CIPD analysed the economic impact of the changes in the labour market since the recession began in 2008.
It said that almost 2.7 million people have been made redundant in the past four years, which equates to one employee in 10 since the start of the recession. The report, based on Office for National Statistics figures and the CIPD’s own survey data, points out that the manufacturing and construction industries were hardest hit, and combined accounted for one-third of total redundancies since 2008.
The CIPD said that, adjusting for the share of redundancies across sectors and differences in the average cost of redundancy between sectors, the total cost of redundancy to UK employers since the start of the jobs recession is an estimated £28.6 billion.
As well as the cost to employers, the report also highlighted a cumulative loss of output to the economy of between £87 billion and £135 billion (between 6% and 10% of gross domestic product), which it said depended on different assumptions about the potential productivity of unemployed people and the extent of under-employment among people in work.
The report also found that two-thirds of people made redundant are paid less in the next job they find, with an average “pay penalty” of 28%.
Dr John Philpott, chief economic adviser at the CIPD, said: “It has been four years since the labour market began to be hit by the aftershock of the global financial crisis. The impact on the extra one million people unemployed is plain to see but the financial pain of the jobs recession has been felt by employers and people in work as well as the jobless.
“The cumulative cost of high unemployment and extensive underemployment has been massive and without a more robust economic recovery will continue to rise. This further underlines the need for the Chancellor to set out a convincing strategy for growth and jobs in next week’s Budget.”
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